Mortgage Market Update
So what’s transpiring in the market today? A couple of things:
Jobs – as I discussed earlier here, the ADP unemployment rankings came out for the month of May and while it was overall a lousy report, it showed an economy that was contracting but one where the rate of slowdown is slowing down. Does that make sense? It’s sort of like, before you can turn a car around, you need to slow down because if you attempt to do a U-Turn at 75 mph, you’ll crash.
Bernanke – in his prepared (and live testimony) to the House Budget committee said two main things (so far – he’s still talking):
- The rate of contraction of the economy is slowing. Meaning that the economy isn’t hurtling down hill at quite such a breakneck pace any more, it’s merely going downhill at a good clip.
- That if we don’t do something to rein in government spending and the budget deficits, we’re going to run the risk of a double dip recession and send the economy down again as soon as it starts recovering.
No real surprises there. That’s what’s happening already because of interest rates. Rates are going up because of an overabundance of government spending. The increase in rates is going to hurt the housing market which will hurt the economy.
What’s happened with rates? They have drifted down a bit. We’re at:
5.375% with .125 pts for a refi.
5.125% with 0 pts for a purchase (both assume a 30 year fixed with a 740 credit score).
Recommendation – I know I’m sounding like a broken record, but I’m going to keep recommending that you lock all loans as soon as possible. Why?
- The market is still trying to sort out whether the move up in rates is “permanent” or not. Until it does, it’s more likely that rates will go up than down.
- The moves that the government is making and the money they are borrowing to do so don’t increase the market’s comfort level with the direction we’re going.
Grab them while you can, I don’t know how long they are going to stay in the range we’re in.
Tom Vanderwell
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